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State joins nationwide crackdown on bogus health insurance

Minnesota Attorney General Lori Swanson and the Federal Trade Commission announced today at the FTC's offices in New York City a joint national law enforcement crackdown against fake health insurance companies that advertise affordable coverage but don't cover medical bills if they get sick. Attorney General Swanson said the bad economy and high cost of health care are fueling these scams, and she warned consumers in need of health insurance not to do business with unlicensed companies.

"High health insurance premiums and high unemployment have created a market niche for bogus health insurance companies. Many people are struggling with health insurance premiums that have more than doubled in the last decade, and many others lost their health insurance when they lost their jobs. Fake health insurance companies exploit these financial pressures by selling risky health discount plans that don't offer financial protection when people get sick," said Attorney General Swanson.

Nationwide, the average premium for an individual health insurance policy went from $2,196 in 1999 to $4,824 in 2009, and the average premium for a family health insurance policy went from $5,791 in 1999 to $13,375 in 2009, according to the National Conference of State Legislatures. The number of Minnesotans without health insurance jumped from 7.2 percent in 2007 to 9.1 percent in 2009, mostly due to job loss. In Minnesota, nearly 15 percent of Minnesotans are unemployed or underemployed, according to a report filed last year by the Minnesota Management and Budget agency. In the United States, 14.6 million Americans are still looking for employment, according to job figures released last Friday by the U.S. Department of Labor.

Attorney General Swanson joined FTC Bureau of Consumer Protection Director David Vladeck, Attorney General Greg Zoeller of Indiana, and New York State Superintendent of Insurance James Wrynn in announcing the nationwide law enforcement crackdown against health discount companies posing as health insurance companies.

In connection with the national crackdown, the FTC today announced lawsuits against three companies selling health discount plans: Consumer Health Benefits Association of Florida, Healthcare One, LLC of Arizona, and United States Benefits, LLC of Tennessee. The Attorney General's Office provided assistance to the FTC in its investigations. In September, 2009 Attorney General Swanson filed a lawsuit against Consumer Health Benefits Association. In July, 2010, her office won a Consent Judgment barring the company and its principals from selling health discount plans in Minnesota and requiring the company to pay $500,000 in restitution and penalties.

In February, 2010 Attorney General Swanson filed a lawsuit against two other companies selling health discount plans: Direct Medical Network Solutions, Inc. and Association Healthcare Management, Inc., d/b/a Family Care, both of Texas. In March, her office won a Consent Judgment against Direct Medical barring the company and its principals from selling health discount plans in Minnesota and requiring the company to pay $250,000 in restitution and penalties. The lawsuit against Family Care remains pending.

The lawsuits filed by the FTC and Attorney General Swanson share common characteristics. The companies targeted are among a niche group of companies that seek out citizens who are looking for affordable coverage in the face of high health insurance premiums. The companies deceptively sell limited discount plans to consumers, in part by misleading them into believing that the plans are health insurance or insurance-like products. Health discount companies often use insurance terms like "coverage," "deductible," "co-pay" and "premium" to confuse consumers. The companies sometime misrepresent that the plans have a vast network of doctors and hospitals or offer 80-20 "coverage." In fact, health discount plans don't provide health insurance, but only provide small discounts off the prices charged by a limited number of providers. The companies often target people who have sought online quotes for health insurance, and they often push for quick sales. They generally charge enrollment fees between $100 and $150 and monthly fees between $100 and $450.

The Attorney General warned consumers:

· Discount Plans Are Not Insurance: A health discount plan is not an insurance policy and does not provide insurance protection; instead, it offers at best limited discounts from the retail price charged by a limited number of doctors, clinics, and hospitals. Only insurance companies licensed by the State of Minnesota can sell health insurance in Minnesota.

· Discount Plans Do Not Pay Your Doctor: A health discount plan does not pay your doctor, clinic, or hospital for your bills and does not insure you for your health care bills.

· Be Careful Consumers: Read any plan before you buy it.

· Beware Of Empty Promises: Some health discount companies operate a "bait and switch" scheme in which they make verbal promises about the supposed benefits of the plan, which they try to disclaim away in writing after the fact.

· Walk Away If They Say "Time Is Running Out": Beware of sales pitches where you are told that the current monthly fee is only available for a limited period of time, or that the company may only sell a limited number of plans in Minnesota.